Major lenders are showing that the storage investment market isn’t only about utility-scale projects. There are exciting deals to be done in the distributed sector too.
This week, US solar developer Nexamp secured a $440m credit facility from a group of lenders to fund the construction of a 380MW portfolio of solar and storage projects across five US states. The portfolio is made up of nearly 100 community solar projects and 120MWh of battery storage capacity.
MUFG Union Bank was coordinated lead arranger for the deal, which took the form of a syndicated financing. This is one of the largest ever debt packages for a community solar and storage portfolio.
Over the last five years, the energy storage industry has been boosted by the fact that solar has overtaken onshore wind as the main driver of growth in renewables globally, mainly due to the expansion of utility-scale solar.
In 2020, global investment in solar rose 12% annually to $148.6bn, while worldwide investment in wind fell 6% to $142.7bn according to Bloomberg New Energy Finance.
The International Renewable Energy Agency reported last year that installed onshore wind grew 21% between 2016 and 2019 to 594GW, but solar doubled to 586GW in the same period.
This expansion of utility-scale solar is supporting the growth of utility-scale storage because solar farms pair well with large batteries. Consequently, this is helping to attract funding for utility-scale battery projects, particularly in Australia and the US.
However, the Nexamp deal demonstrates that lenders are comfortable with the risk profile of community-scale solar schemes too. Therefore we should expect to see more debt and equity flowing into portfolio deals in the distributed solar and storage sector.
Founded in 2007, Nexamp says it is able to make community solar available for anyone because it doesn’t demand up-front fees, long-term commitments, or credit checks.
The company – which develops, owns and operates distributed solar schemes in the US – currently has a subscriber base of more than 25,000 homes and businesses.
What has been key here is that, by bundling 100 of the assets in its development pipeline into a portfolio, Nexamp has been able to tap into a pool of lenders that might not back individual distributed schemes.
Nexamp said it has 300 solar and storage projects in its pipeline, and that the credit facility announced this week to support 100 of these will help the firm grow quicker.
Peter Tawczynski, chief financial officer, said there was “strong lender interest” demonstrating the momentum in the renewables industry, and this bodes well for growth in the distributed solar and storage sectors.
Tawczynski added: “As we bolster our solar portfolio with energy storage solutions, we look forward to launching new products in more geographies and delivering savings to our expanding customer base.”
Takaki Sakai, managing director of MUFG’s project finance team, said distributed power generation and storage will make an important contribution to the energy transition: “Distributed power generation – and community solar in particular – is a growing segment of the renewable energy market that plays a vital role in reducing carbon emissions with the participation of a wide range of community members.”
This $440m debt financing package shows one way to achieve that growth.